New Jersey Continues To Crack Down On Illegal Online Gambling Sites

September 30, 2016
New Jersey Continues To Crack Down On Illegal Online Gambling Sites

The New Jersey Division of Gaming Enforcement and the Kahnawake Gaming Commission recently revealed that the two regulatory bodies reached an agreement aimed at curbing access of illegal offshore online gambling sites to the United States.

The agreement was set in motion after the DGE discovered one of its hosting licensees, Continent 8, LLC, was also hosting unlicensed sites through a data center on the Mohawk Territory of Kahnawake, Canada.

According to independent press releases issued by the DGE and the KGC, online gaming sites accepting bets from any state in the US where it doesn’t possess the appropriate licenses will have its license revoked by the KGC.

This creates what amounts to choke point at what had previously been one of the main highways unlicensed sites had been using to access the US market.

In its press release, the KGC said it has notified its licensees that as of October 1, 2016, “any applicant or existing licensee that accepts players from a US state without being authorized by the US state to do so, is engaged in an activity that adversely affects Kahnawake’s jurisdictional reputation and integrity.”

One such site, Bovada (along with Ignition Casino, which acquired the Bovada poker platform just a few weeks ago) decided to preemptively surrender its license to the KGC. This seems to be a clear indication it will continue to operate in the US by some other avenue.

The NJDGE press release reads:

The New Jersey Division of Gaming Enforcement (DGE) today announced that it has reached a series of agreements related to its licensee, Continent 8, LLC, that will prevent illegal Internet gaming websites from accepting bets from residents of the United States and New Jersey through a data center located on the Mohawk Territory of Kahnawake, Canada.

When DGE became aware that Continent 8, LLC, may have provided services to certain illegal Internet gaming websites through that data center, it took prompt action. After extensive discussions with the Mohawk Council of Kahnawake and the Kahnawake Gaming Commission (KGC) involving unique jurisdictional issues, the Division was able to ensure that any such websites originating from Kahnawake will no longer be available to United States residents in jurisdictions where these companies are not authorized to operate, after September 30, 2016.

As a result, sites such as Bovada, a leading provider of illegal online sports wagering and other online gaming content, will no longer be operating out of the data center located in Kahnawake. Also after that date, the KGC will take regulatory action against any of its applicants or licensees found to be accepting such wagers.

DGE Director David Rebuck stated: “The Division is pleased to have the KGC’s assistance as a fellow regulator and looks forward to working together in the future. We were able to reach a series of agreements that are amenable to all of the parties involved and satisfy the Division’s regulatory concerns. The Division appreciates the KGC’s commitment and looks forward to its continued cooperation in the fight against unlicensed Internet gaming traffic. This agreement is an important step in ensuring the integrity of Internet gaming operations in New Jersey and helps ensure that online gaming patrons can play on fair, regulated sites.”

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Crackdown continues

This isn’t the first attempt by New Jersey to crack down on the numerous offshore, unlicensed online gambling sites still operating in the US. Over the past two years, New Jersey has instituted several other policies on this front.

In May 2014, the New Jersey Division of Gaming Enforcement sent cease and desist letters to online affiliates that were double dipping — advertising both regulated and unregulated sites. The crackdown on affiliates had a direct impact on the amount of advertising unlicensed sites had in the New Jersey market.

Around the same time, the DGE’s efforts convinced several of the biggest offshore, unregulated online gaming sites to leave the market in various capacities. Some left New Jersey entirely, while others simply stopped accepting new customers from New Jersey.

In June 2015, the DGE took the next step with affiliates, forcing them to choose a side, and creating a bright-line date for the decision to be made.

The singling out of Bovada in the DGE press release is interesting. As noted above, Bovada was one of the sites that announced it would no longer accept new players from the New Jersey market, but, current customers were still able to play on the site. Additionally, how stringent the site was in geolocating players is questionable.

Bovada could have simply geolocated players by the honor system; accepting that the address entered by the player is true.

With the relinquishing of its license, it looks like Bovada and Ignition will continue to operate in the US, either as a completely unlicensed site (a KGC seal is considered by many in poker to be little more than a rubber stamp) or through another jurisdiction.

Because of this, it remains to be seen how effective this deal will be in shutting down unlicensed online gaming sites.

However, what the DGE has done is add yet another deterrent to operating in the US.  Offshore sites currently licensed by the Kahnawake and using the servers will need to find a new home. And if this game of whack-a-mole continues, operating in the US could become very expensive and very frustrating for these sites.

Can the Kahnawake regulators be trusted?

The Kahnawake Gaming Commission has a checkered history in the industry, and even more so in the United States. The KGC has been regulating online gambling sites since 1999, and in many cases hosting the servers the sites use on the Kahnawake reservation.

The KGC was the regulatory body that oversaw Ultimate Bet and Absolute Poker during the period when insiders at both companies were using a secret backdoor to the site’s software whereby they could see players’ hole cards.

The sites were later purchased by Tokwiro Enterprises, owned by Kahnawake chief Joe Norton. Many believe the sale to Tokwiro was little more than a shell game to hide and protect the true owners – which proved to have quite a bit of truth to it when the Department of Justice indicted and named Absolute Poker’s original owners as the current owners in 2011.

The KGC, despite Absolute and UB being owned by tribal chief Norton’s Tokwiro Enterprises, also conducted the official investigation into the Ultimate Bet insider cheating scandals.

Because of its history of turning a blind eye to what its licensees are doing, there is plenty of skepticism that the KGC might not be as diligent in its oversight as the DGE is hoping they will be on this front.

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